Campus savings help MU plug budget hole

Balancing act

Chancellor gives fiscal update at general faculty meeting

On the same day Missouri’s General Assembly passed next year’s state budget with a $10 million cut to MU’s current appropriation, Chancellor Brady Deaton briefed faculty members about the steps the campus is taking to absorb that decrease in state funding.

The budget bill legislators sent to Gov. Jay Nixon April 29 includes a 5.2 percent reduction to the state’s higher education appropriation. This year, MU received $189 million from the state. Nixon has not yet signed the legislation, and his budget director, Linda Luebbering, has warned that plummeting state tax revenues will likely require the governor to cut the statewide budget further.

Even with reduced state funding, Deaton told the small crowd that attended last Thursday’s general faculty meeting that Mizzou is faring better than many other universities rocked by slashes in state funding.

For the second year in a row, Nixon brokered an agreement with public universities that freezes in-state undergraduate tuition in return for the same or slightly less state support. “We’re obviously very hopeful that that situation will hold,” Deaton said of the pact. “It does appear that was probably the best situation we could hope for.”

Although Deaton’s comments focused on the 2011 fiscal year, which begins July 1, the chancellor cautioned that MU budget planners are bracing for the likelihood that Missouri’s budget woes will continue for some time.

“As we look to fiscal year 2012, there is a general concern because federal stimulus funding will be exhausted next (fiscal) year,” he said. “We do not know, of course, what will happen with the state and federal governments and the overall revenue picture for next year, but most projections are rather pessimistic.

“We will continue to be very cautious and try to err on the side of more stability in what we are doing with funding. We will be keeping you aware of where we are on a day-to-day basis, and we will be trying to respond to opportunities that arise. We’re trying to avoid major disruptions in budgets that have occurred in so many states, leading to furloughs and salary reductions. At the same time we do know that faculty salaries are a major concern.”

Faculty have played a key role as MU works through a selective hiring freeze and aggressively pursues substantial non-salary cost savings without sacrificing academic quality and maintaining a rigorous curriculum, Deaton said. “I give faculty all the credit for finding ways to do the job we are now doing.”

One bright note in the budget picture, he said, is that through salary savings and other cost-cutting measures, MU has built up a $9 million one-time reserve fund and another $9 million in ongoing funding that can be used to plug budget gaps.

At the same time, the chancellor said, growing revenues in several key areas have helped Mizzou balance its budget in tough economic times. For instance, as MU’s research efforts continue to grow, the accompanying growth in indirect cost recovery will add $1.2 million to the university’s bottom line next year.

Although the number of first-time freshmen next fall is expected to grow by only 1 percent or 2 percent, overall enrollment is projected to increase by nearly 540 students. That enrollment growth will increase tuition revenue next year by $3.9 million.

But Deaton stressed that those enrollment estimates could change because an out-of-state tuition increase could push more of those prospective MU students to enroll elsewhere. And, in tough economic times, more Missouri high school graduates are opting to start college at less-expensive two-year schools.

“I would emphasize that while we’re a bit uncertain about these (numbers), we know that we are pressed with our resources,” Deaton said. “We are not happy at all with our student-faculty ratio of 19-to-1, and we have got to move in the longer term toward a more robust faculty structure to address these needs.”

Although the University pledged to hold in-state, undergraduate tuition flat next year, the Board of Curators earlier this month did approve a 5 percent bump in non-resident tuition, a 2.7 percent increase for graduate students and tuition increases for law and veterinary medicine. Those increases will add $5.2 million in new revenue.

MU budget director Tim Rooney pointed out, however, that tuition increases and enrollment growth have a fiscal downside as well. An additional $2 million in campus general operating funds will be needed for scholarships. Higher graduate school tuition means the cost of providing graduate fee waivers for assistantships will grow by $800,000.

The campus also is budgeting $1.5 million next year for additional instruction costs to meet growing enrollments. “Virtually every college on campus has gotten some of those funds to help with the surge in enrollment,” Rooney said.

Including the increased instructional costs, he said MU is facing a total of $9.6 million in other new financial hits to the general operating budget. They include: higher facilities costs, the expense of opening new buildings, $1.4 million for the campus technology infrastructure, $300,000 for faculty promotions and $500,000 for diversity recruitment and spousal accommodations.

If those projections hold up, that would leave MU with an estimated budget deficit of $12 million* next year, Rooney said. “If we didn’t use our reserves, that would be (equivalent to) a 2.6 percent across-the-board budget cut.”

Using $5 million from reserves would leave a 1.5 percent budget gap next year and still allow MU to retain a cushion of reserves if the bleak state budget outlook continues for the 2012 fiscal year. Whatever the final budget cut is, units will also have to reallocate to cover an increase in employee benefit costs totaling $3.4 million across the operating budget.

Rooney stressed that he and other budget planners are constantly updating their assumptions and projections. “The numbers change about every 48 hours as we get better information,” he said.

* In an earlier version of the story, we mistakenly cited the budget deficit as $1.2 million. The correct figure is $12 million.